Currency wars the making of the next global crisis
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Average rating4
In 1971, President Nixon imposed national price controls and took the United States off the gold standard, an extreme measure intended to end an ongoing currency war that had destroyed faith in the U.S. dollar. Today we are engaged in a new currency war, and this time the consequences will be far worse than those that confronted Nixon.
Currency wars are one of the most destructive and feared outcomes in international economics. At best, they offer the sorry spectacle of countries' stealing growth from their trading partners. At worst, they degenerate into sequential bouts of inflation, recession, retaliation, and sometimes actual violence. Left unchecked, the next currency war could lead to a crisis worse than the panic of 2008.
Currency wars have happened before-twice in the last century alone-and they always end badly. Time and again, paper currencies have collapsed, assets have been frozen, gold has been confiscated, and capital controls have been imposed. And the next crash is overdue. Recent headlines about the debasement of the dollar, bailouts in Greece and Ireland, and Chinese currency manipulation are all indicators of the growing conflict.
As James Rickards argues in Currency Wars, this is more than just a concern for economists and investors. The United States is facing serious threats to its national security, from clandestine gold purchases by China to the hidden agendas of sovereign wealth funds. Greater than any single threat is the very real danger of the collapse of the dollar itself.
Baffling to many observers is the rank failure of economists to foresee or prevent the economic catastrophes of recent years. Not only have their theories failed to prevent calamity, they are making the currency wars worse. The U. S. Federal Reserve has engaged in the greatest gamble in the history of finance, a sustained effort to stimulate the economy by printing money on a trillion-dollar scale. Its solutions present hidden new dangers while resolving none of the current dilemmas.
While the outcome of the new currency war is not yet certain, some version of the worst-case scenario is almost inevitable if U.S. and world economic leaders fail to learn from the mistakes of their predecessors. Rickards untangles the web of failed paradigms, wishful thinking, and arrogance driving current public policy and points the way toward a more informed and effective course of action.
Reviews with the most likes.
This was an absolutely fascinating book on a topic I suspect few people educated in America have any foreknowledge.
Recently, I've found myself interested in fiscal responsibility both on a personal scale and national scale. To that end, I've read other books such as Endgame by John Maudlin as well as Michael Lewis' excellent books The Big Short and Boomerang. These books discuss the macroeconomic effects of our money system, national debt and trade. Very interesting stuff, especially if you have something of a traditional American education. Absolutely none of this stuff was covered in my economics classes during school.
The fact is that we are currently in a very interesting time. On the short term we have significantly increasing political turmoil in the USA and abroad. The national debt is astronomical and no real solution is on the horizon. The US elections are in 3 weeks. On the intermediate term, we are still in the throes of a significant depression for the past 4 years from a jobs standpoint and worldwide economic growth (though the stock market has mostly recovered). On a somewhat longer-term, we may be at a “market top” on a 30-40 year scale. Uncertain times, indeed. We've experienced significant economic manipulation by most of the major governments of the world in an effort to halt the downward slide of the current depression. Whether or not that has been successful is probably a very personal discussion for you.
That's a lot of preface for a book review, but if you have put any thought whatsoever into any of the stuff in the preceding paragraph, you really should consider checking out this book. It not only has an extremely well-considered accounting of our current situation, which turns out to be Currency War 3, but also gives a fascinating account of Currency Wars 1 and 2 (which occurred around WW1 and WW2, respectively).
There is excellent discussion of various United States monetary policies over the last 200 years. Discussion of various economic theory that you may hear spoken of on CNBC or maybe even some of the political debates and the commentary that follows. The educational value of knowing where The Fed came from and how it arose, as well as the changes to Federal Reserve policy and structure over the years is excellent and invaluable.
One of the great things about Currency Wars is that I felt James Rickards was very fair and non-political in his assessment. He applied the same degree of historical perspective with the current policymakers and situation as he did with the previous major shifts in monetary policy. There doesn't seem to be any political agenda other than educating individuals who have interest on the topic. In the end of the book, the author discusses some possible future scenarios depending on how things go from here based on economic theory.
While he doesn't seem to have a political bias, there is clearly a bias in his opinion on how monetary policy should be handled. This is interesting to me as a layman as well. We simply don't get to see much point-counterpoint discussion from the major policymakers at The Fed like Ben Bernanke and the other mega-bankers.
Overall, I just can't say enough positive things about this book. Totally awesome.
